Why Are Pharmaceuticals So Expensive?


Published on

Price tags on pharmaceutical drugs continue to provide sticker shock to an already financially struggling market. When a person is suffering with a condition that no available medicine can effectively treat, the idea that a new drug is on the way can be exciting.

Unfortunately, with the monopoly pricing that often accompanies new drugs, the cost can be too far out of reach for the patient and has the potential to drive up insurance premiums for everyone.

Published in: Business, Health & Medicine
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Why Are Pharmaceuticals So Expensive?

  1. 1. EXPENSIVE PHARMACEUTICALS MBAA © 2014 Page 1 Why Are Pharmaceuticals So Expensive?
  2. 2. EXPENSIVE PHARMACEUTICALS MBAA © 2014 Price tags on pharmaceutical drugs continue to provide sticker shock to an already financially struggling market. When a person is suffering with a condition that no available medicine can effectively treat, the idea that a new drug is on the way can be exciting. Unfortunately, with the m o n o p o l y p r i c i n g t h a t o f t e n accompanies new drugs, the cost can be too far out of reach for the patient and has the potential to drive up insurance premiums for everyone. " The idea that money shouldn’t determine whether or not a person gets the proper care is prevalent here. Most “regular people” simply can’t afford to pay the cost of many of these new drugs. Even if they sell everything they own and use that money only for pharmaceuticals, some could still never afford them. " This issue remains a sore spot because of the many treatable illnesses from which low- income people have died. However, wealthier people successfully pushed through the same ailments by taking these more expensive drugs. What is the point of having these innovative, life-saving medications if they are out of reach of such a large percentage of the population? For instance, Sovaldi, a groundbreaking drug that treats hepatitis C, has shown to cure most patients who use it for a 12-week period. The problem is that this miracle drug comes with a steep cost - $1,000 per pill to be exact. A full treatment would cost $84,000, and would supply the full 12 weeks of medication. That’s more than most people make from their salary in two years. " One report stated that if every American with hepatitis C took this medication, they would spend a total of $227 billion – a figure uncomfortably close to the amount that is currently spent on all pharmaceuticals combined ($260 billion). The company that makes Sovaldi has stated that the cost of this cure for hepatitis C is not as steep as it seems because the cost of taking other hepatitis C medications is extremely high as well. They believe that a comparison of total price of both methods will show the public why the benefits outweigh the cost. " Page 2
  3. 3. EXPENSIVE PHARMACEUTICALS MBAA © 2014 Officials at pharmaceutical companies cite the cost of research and development as a major contributing factor to the cost of medications. Creating pharmaceuticals is an expensive endeavor, as about 95 percent of all drugs never make it to the market, failing in clinical trials. " It can cost billions of dollars to launch one new drug when you consider the research, staffing and experimentation involved. Multiply that by the number of attempts to launch a new product (successful or failed), and you’ll find that number is in the billions. " Clinical trials are an enormous part of this equation. Phase III clinical trials are mandatory for the FDA approval of a good portion of new drugs, and they equal slightly less than half of all pharmaceutical research and development costs. If calculated only by the number of drugs that actually get approved, that number jumps to about 90 percent. " Some pharmaceutical companies are said to view their prices as a way of regaining some of what was lost during the numerous failed attempts at developing pharmaceuticals. This seems to be a portion of the reason the cost of pharmaceuticals is as high as it is. Whether they really need to be that high is another question. " Money can’t buy happiness, but it can definitely buy more time or better quality for your life if you happen to have a life-altering health issue that can be treated with medication. Who wouldn’t shell out big bucks to save their own life or that of a loved Page 3 Benefits to the Consumer Is Science Enough to Justify the Expense?
  4. 4. EXPENSIVE PHARMACEUTICALS MBAA © 2014 one? The problem is that not everyone has big bucks to shell out. Should their life suffer or be cut short solely because of finances? It doesn’t seem so, considering we are in this great country with an enormous amount of fantastic medical evolution happening all around us. " On the surface, it also seems the pharmaceutical companies are well aware of this fact and develop their price structures accordingly. Still, quality of life and increased life span are two justifications used by representatives of big pharmaceutical companies, and they have expressed their belief at how unfair it is for patients and insurance companies to complain about the prices when the medication offers such great benefits. " It’s true that these companies hold the key, and they believe we should be thankful for the fact that there is a treatment for many of these ailments. Still, someone would be stumped trying to explain to a sick patient why they can’t be treated due to cost when the pharmaceutical companies have the answer right in their hand. " Drug makers have no competition during the time they are protected by patents. Even though patents are good for 20 years, it can take upwards of eight years to get the drug approved through the FDA. So by the time the drug hits the market, there may only be a few years left on the patent. " Some believe this short monopoly period is a contributor to the high price of pharmaceuticals, as the makers will only have a limited time to charge monopoly prices before being forced to be competitive. This too is an unsettling revelation, because while patients are waiting on a generic alternative, people are bankrupting themselves, or worse, skipping treatment because there are no affordable treatment options. " Page 4 The Monopoly
  5. 5. EXPENSIVE PHARMACEUTICALS MBAA © 2014 " Marketing for pharmaceuticals is a $300 billion industry worldwide, and it is only expected to rise. The largest 10 pharmaceutical companies have a collective hold of $100 billion of this market by themselves, and they benefit from profit margins of around 30 percent. Pharmaceutical companies spend about one-third of their revenue on marketing, which is twice the amount they spend on research and development. Marketing is an essential element in promoting any business, but many believe this astronomical number not only represents the highly frivolous way in which these dollars are spent but that they are also not conducive to a sustainable business, serving only to drive up the price of drugs. " It’s obvious that most (if not all) of these reasons and justifications are serving to raise pharmaceutical prices, but these questions remain: Are pharmaceutical prices fair? Do they have to charge $1,000 per pill to cure hepatitis C? If so, why are Canadians paying $650 for the same pill? Furthermore, how were other countries able to negotiate a price of $900 for a 12-week course? That’s less than the cost of one of these pills in the United States. " Some say this means that all of the reasons and speculations above are just poor excuses to squeeze money out of the American public while providing lower-cost, easy medications to our foreign counterparts. Others say it’s because there is nothing stopping them from charging whatever they want – no cost control. Still, drug makers want the public to understand all of the steps taken to create the medications as well as take into consideration their life-changing benefits. " Page 5 Their Massive Marketing Vehicle
  6. 6. EXPENSIVE PHARMACEUTICALS MBAA © 2014 America’s healthcare system is already the largest in the world by a long shot. Not just the pharmaceutical industry, but the healthcare industry in its entirety. But while the cost of pharmaceuticals in the United States could seemingly take a dip without affecting the livelihood of the drug makers, some believe that forcing them to lower prices by way of cost control would cause innovation to plummet and be even more dangerous, decreasing life expectancy. " As it stands, a little relief would go a long way, and we will hopefully see some type of positive changes in the relationship between patients, insurance companies and drug makers as our healthcare system evolves. " end in sight to fees created in hospitals and other healthcare facilities to offset the costs of running that facility, according to data from the long-term budget Page 6 Call 855-203-7058 or Click the Button to Visit BillAdvocates.com Looking to Dispute Medical Bills?